Exchange operator Cboe gets nod to launch leveraged crypto derivative products

Cboe Global Markets CBOE on Monday said it received regulatory approval to offer leveraged derivatives products on its digital trading platform, including physically and financially settled bitcoin and ether margined futures contracts.

The U.S. Commodity Futures Trading Commission approved Cboe Digital to be the first U.S.-regulated crypto exchange and clearinghouse platform to offer leveraged derivatives when the contracts launch in the second half.

The margined contracts will let users trade crypto futures while putting less collateralized capital up front, with trades executed and cleared through an approved set of member futures commission merchants, Chicago-based Cboe said. Cboe Digital's clearinghouse will act as the central counterparty to reduce default risks.

Cboe Digital currently allows trading and clearing of bitcoin and ether futures on a fully collateralized basis, meaning users must provide the full amount of futures contracts upfront.

"Derivatives are a time-tested and valuable tool that enable investors to gain market exposure and manage their risk," John Palmer, president of Cboe Digital, said in a statement.

Cboe Digital also supports the spot trading of bitcoin, bitcoin cash, ether, litecoin and USDC.

On Oct. 20, 2021, Chicago-based Cboe announced its intention to buy crypto exchange and clearinghouse ErisX. At the time, the price of bitcoin topped $67,000. The deal closed in May 2022 and in July, with the price of bitcoin hovering in the $20,000-$25,000 range, the exchange operator took a $460 million writedown on the platform, which it had renamed Cboe Digital.

In November, Cboe said 13 firms had taken minority equity stakes in Cboe Digital, including Robinhood Markets Inc HOOD, Interactive Brokers IBKR, Virtu Financial VIRT, Jane Street, Jump Crypto, DRW, and tastytrade, which is owned by IG Group IGG.

FTX had sought approval from the CFTC to directly trade in cryptocurrency derivatives, but the application was pulled when the firm filed for bankruptcy in November.